Insurance Fraud Is Far Too Risky to Contemplate

Although there are no official statistics on insurance fraud all insurers agree that when the going gets tough insurance fraud increases. This increases the costs of insurance and it eventually filters through to the consumer by way of increased premiums.

Many of the people who try to defraud their insurance company are otherwise law-abiding citizens who would never consider getting involved in white collar crime. The fact that these people pay monthly insurance premiums may be a contributing factor as to why people excuse themselves for defrauding insurers.

Many of these people pay these premiums for years before they have their first claim which they then view as an opportunity to claim back most or even more than the monies that they have contributed to the insurance. Unfortunately these people do not realise the gravity of insurance fraud and the consequences should the fraud be uncovered.

Most insurance fraud takes the form of either fraudulent or inflated claims or attempts to influence the decisions of assessors in their favour. A large percentage of these cases are uncovered but the costs of policing the system are eventually reflected in increased premiums.

The most common insurance fraud is probably the practice of inflating claims. These people do have a genuine claim but instead of just claiming for their actual loss they increase the amount of the claim by either claiming for goods of a far superior value than the actual goods lost or stolen, or by claiming goods that were not lost or stolen at all. This is very risky and in the case of a theft claim the fraud can easily be uncovered if the perpetrators are caught and your stolen possessions are recovered by the police.

In a recent case a prominent member of the community reported a claim after his house had been burgled. Amongst the items on the claim form was a set of genuine leather suitcases and a state-of-the-art camera. The insured was adamant that the suitcases were genuine leather when this was queried by the assessor. Shortly before the claim was paid out the police caught the perpetrators with the stolen goods and both the suitcases and the camera were found to be of inferior quality to those that the claimant had specified on his claim form.

Unfortunately for the claimant there was sufficient evidence that these were in fact the insured's items. The insurance company repudiated the claim in its entirety and cancelled the insurance policy. This person has been blacklisted and will have difficulty in purchasing insurance with any South African insurance company.

On an even more serious note, there is a growing tendency for insurers to submit fraudulent claims where the entire loss is fictitious. Recently an article on news24 quoted security MEC Siphosezwe Masango, in a discussion on the Lebombo border post, as saying that he noted that some people were taking their own cars across the border and then claiming they were stolen so that they could claim insurance money.

In another article in the Sowetan it was reported that over the course of a single weekend, border post officials seized eight vehicles worth R1,8million that were believed to have been stolen in South Africa. The MEC then also made mention of people who arrange for their cars to be taken over the Lebombo border, report the vehicles as stolen and make fraudulent claims against their car insurance policies.

With the tightening of controls at border posts these fraudsters run a very real risk of being caught and the insurance companies will not hesitate to take these cases to trial.

Another area in which people try to defraud the insurance companies is by attempting to influence decisions made by assessors either regarding the value of the claim or the extent of liability of the insurance company. People considering approaching the assessors with this type of request stand an excellent chance of being reported and having their insurance policies cancelled.

Assessors are professional individuals who are very knowledgeable in their field and mostly work for a variety of insurance providers. Most of them have been around the block and are skilled at detecting attempts at fraud, can read body language and are beyond reproach when it comes to bribery or fraud.

These professionals determine the merits as well as the quantum of each incident and advise the insurers on how to accurately apportion the responsibility and costs. They are unbiased, but as their source of revenue is dependant on their reputations it is highly unlikely that they would jeopardize their careers and be influenced into defrauding the insurance company. They have a duty to report to the insurance companies any attempts by individuals to involve the assessors in defrauding the insurers.

In a continuing battle to combat insurance fraud a leading insurance company has introduced an SMS service whereby any member of the public can report any suspected insurance fraud. Total anonymity and confidentiality is assured.

It is hoped that this fraud tip line sets the standard across the insurance industry as the more fraud that is detected the less the innocent policy holders will need to cough up to finance these scams.